Cullen v. Bowles

April 4, 1945

CULLEN ET AL.v.BOWLES, ADM'R, OFFICE OF PRICE ADMINISTRATION.

Author: Hand

Before L. HAND, AUGUSTUS N. HAND, and CLARK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

On May 29, 1943, the debtor, 325 East 72nd Street, Inc., filed a petition for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. The petition was approved and Thomas J. V. Cullen was appointed trustee on June 3, 1943. Its principal asset was an apartment house at No. 325 East 72nd Street, Borough of Manhattan. Twenty-three of the apartments were owned by proprietary tenants who were stockholders of the debtor corporation under ninety-nine year leases and it is conceded that the rent regulations hereafter described did not apply to them. Thirty-five of the apartments were rented under written leases on an ordinary commercial basis. Only the rent of these apartments is involved in this proceeding. The reorganization had been pending for over four months when New York City was declared a Defense Rental Area, and the Emergency Price Administrator issued rent regulations in October 8, 1943, effective November 1, 1943. These regulations froze rentals at the level of March 1, 1943. Of the thirty-five apartments leased on a commercial basis there were on November 23, 1943 ten where the rentals were higher than the maximum rental allowable under the Emergency Price Control Act and the rent regulations promulgated thereunder. On an annual basis the rentals charged by the trustee exceeded the maximum prescribed rentals by $2,661, but were found by the District Court to be $1,084 less than the fair and comparable rental value for such premises.

The trustee went into possession of the above premises on June 4, 1943, and by petition filed in the District Court on November 23, 1943, sought to have it determined whether he was subject to the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 901 et seq., and the rent regulations for housing thereunder, or was only subject to the order of the Bankruptcy Court under the general provisions of Chapter X of the Bankruptcy Act. His petition also sought to obtain an order authorizing him to collect the rents chargeable under these existing leases and directing him to abstain from filing notices of maximum rents and registration statements under the regulations of the Office of Price Administration.

The District Court held that the Emergency Price Control Act, and the regulations under it, are not controlling because (1) it does not repeal expressly or impliedly any portion of the Bankruptcy Act, (2) the property and its income are vested in the subject to the jurisdiction of the Bankruptcy Court, and (3) the jurisdiction to determine whether or not a plan of reorganization is fair, equitable and feasible is solely in that court and cannot be shared with any other tribunal or administrative body.

The District Court further held that it did not declare the Emergency Price Control Act or any regulation promulgated thereunder invalid or to go counter to Section 204(d) thereof, 50 U.S.C.A.Appendix § 924(d), but merely held that the Emergency Price Control Act did not apply because there had been no repeal of any part of the Bankruptcy Act and that to imply any repeal would interfere with the control of Bankruptcy Courts over corporate reorganizations and might at times make them not feasible.

In accordance with these views the court made an order directing Thomas J. V. Cullen as trustee to collect the rents chargeable under the existing leases and to abstain from filing notices of maximum rent and registration statements under the regulations of the Office of Price Administration, and adjudging that the powers of the trustee in the present reorganization proceeding are not curtailed by the Emergency Price Control Act of 1942 and the Rent Regulations for Housing in the New York City Defense-Rental Area which had been promulgated thereunder.

We think it evident that the District Court erred in authorizing the trustee to establish or collect rents determined on a basis contrary to the regulations promulgated under the Emergency Price Control Act and in holding that a trustee in reorganization might resort to a Bankruptcy Court to obtain an adjudication as to whether he was subject to the regulations. Indeed, aside from every other consideration, Section 305 of the Act, 50 U.S.C.A.Appendix § 945, would seem to negative the conclusion reached by the court below when it says: "No provision of law in force on the date of enactment of this Act shall be construed to authorize any action inconsistent with the provisions and purposes of this Act * * *." Moreover, Section 204(d) of the Act provides in part as follows:

"* * * The Emergency Court of Appeals, and the Supreme Court upon review of judgments and orders of the Emergency Court of Appeals, shall have exclusive jurisdiction to determine the validity of any regulation or order issued under section 2, of any price schedule effective in accordance with the provisions of section 206, and of any provisions of any such regulation, order, or price schedule. Except as provided in this section, no court, Federal, State, or Territorial, shall have jurisdiction or power to consider the validity of any such regulation, order, or price schedule, or to stay, restrain, enjoin, or set aside, in whole or in part, any provision of this Act authorizing the issuance of such regulations or orders, or making effective any such price schedule, or any provision of any such regulation, order, or price schedule, or to restrain or enjoin the enforcement of any such provision."

The objects of the Emergency Price Control Act are set forth therein as follows:

"Purposes; Time Limit; Applicability

"Section 1. (a) It is hereby declared to be in the interest of the national defense and security and necessary to the effective prosecution of the present war, and the purposes of this Act are, to stabilize prices and to prevent speculative, unwarranted, and abnormal increases in prices and rents; to eliminate and prevent profiteering, hoarding, manipulation, speculation, and other disruptive practices resulting from abnormal market conditions or scarcities caused by or contributing to the national emergency; to assure that defense appropriations are not dissipated by excessive prices; to protect persons with relatively fixed and limited incomes, consumers, wage earners, investors, and persons dependent on life insurance, annuities, and pensions, from undue impairment of their standard of living; to prevent hardships to persons engaged in business, to schools, universities, and other institutions, and to the Federal, State, and local governments, which would result from abnormal increases in prices; to assist in securing adequate production of commodities and facilities; to prevent a post emergency collapse of values; to stabilize agricultural prices in the manner provided in section 3; and to permit voluntary cooperation between the Government and producers, processors, and others to accomplish the aforesaid purposes. * * *"

In our opinion one of the most important purposes of establishing the Emergency Court of Appeals was to create a single court which, subject to review by the Supreme Court, can determine whether the Price Administrator keeps within his jurisdiction in preventing abnormal increases in prices and rents, and establishes regulations and makes orders that are just and based on the economic data and investigations which he is permitted to conduct under the terms of the Act and the expert information which he gains from various sources. Under Section 203(a) a procedure before the Administrator is provided for persons aggrieved by any regulation, order or price schedule and under Section 204(d) a review of the Administrator may be had in the Emergency Court of Appeals of protests to the Administrator which are denied. Only by adhering to this procedure can discordant rulings of local district courts as to practically identical issues be avoided, as well as appeals from these district courts to the various circuit courts of appeal in which conflicting decisions are likely to be rendered. There can be no doubt that if such a practice as was pursued in the case at bar were adopted it would be a serious obstacle to the efficient and uniform procedure, of the Emergency Price Control Act whereby a single court is given control of the review of the orders of the Administrator.

Even in the absence of Section 204(d) we think that the Emergency Price Control Act covers trustees in bankruptcy ...

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